Letter from Washington

The earlier word here had been that Phil Gramm’s spectacular six-years- to-zero deficit-reduction bill was political wizardry, because it put the deficit to sleep through next year’s mid-term election. Not so, say Hill insiders, including Phil Gramm himself in a conversation with Cato. “The President has got to submit the toughest budget ever on January 15,” says the freshman Texas senator and Republican convert, “and Congress has got to adopt the toughest budget it’s ever adopted on May 15.” If the Hill fails to do that (it almost certainly will), Gramm foresees an enforced presidential acrossthe-board cut before election day that will affect every program in the federal budget. Gramm says that if Reagan doesn’t veto more bills in the next month than he vetoed since taking office, “We’ll pull the trigger November 1 of this year, with the across-theboard cut then.” Gramm is assuming that his Gramm-Rudman-Hollings bill will be passed in short order, and he is almost certainly correct in so thinking.

Here’s the rub for Reagan: Roughly one-third of the near trillion-dollar U.S. budget goes to military spending, one-third to Social Security and interest on the national debt, and one-third to domestic outlays (child care, education, environment, etc.). Since defense and Social Security are both untouchables (the first by presidential fiat, the second by the Gramm bill), the heavy carving by Mr. Reagan will have to be done on the last one-third, i.e., domestic spending. Since no one believes that the whole reduction can come from that one-third, Mr. Reagan will be forced to a) cut the military budget or b) raise taxes, both of which are anathema to him.

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The earlier word here had been that Phil Gramm’s spectacular six-years- to-zero deficit-reduction bill was political wizardry, because it put the deficit to sleep through next year’s mid-term election. Not so, say Hill insiders, including Phil Gramm himself in a conversation with Cato. “The President has got to submit the toughest budget ever on January 15,” says the freshman Texas senator and Republican convert, “and Congress has got to adopt the toughest budget it’s ever adopted on May 15.” If the Hill fails to do that (it almost certainly will), Gramm foresees an enforced presidential acrossthe-board cut before election day that will affect every program in the federal budget. Gramm says that if Reagan doesn’t veto more bills in the next month than he vetoed since taking office, “We’ll pull the trigger November 1 of this year, with the across-theboard cut then.” Gramm is assuming that his Gramm-Rudman-Hollings bill will be passed in short order, and he is almost certainly correct in so thinking.

Here’s the rub for Reagan: Roughly one-third of the near trillion-dollar U.S. budget goes to military spending, one-third to Social Security and interest on the national debt, and one-third to domestic outlays (child care, education, environment, etc.). Since defense and Social Security are both untouchables (the first by presidential fiat, the second by the Gramm bill), the heavy carving by Mr. Reagan will have to be done on the last one-third, i.e., domestic spending. Since no one believes that the whole reduction can come from that one-third, Mr. Reagan will be forced to a) cut the military budget or b) raise taxes, both of which are anathema to him.